In the "Lets Talk Legal" meeting, Cecil Harvell and Wes Collins discussed when trusts are necessary, emphasizing that trusts should be established based on specific client needs rather than generic reasons like avoiding probate, which is less relevant in North Carolina. They highlighted various situations where trusts are beneficial, such as protecting minor children’s assets, safeguarding special needs beneficiaries, managing assets in second marriages, preventing fraud or undue influence, and planning for long-term care. The speakers stressed the importance of customizing trusts to meet clients' objectives and legal requirements, ensuring the assets are managed and passed on according to their wishes.

Reasons for Establishing a Trust

• Many clients inquire about trusts based on national/internet information, but trust laws vary by state, specifically North Carolina, where various specific reasons dictate the need for a trust rather than just general Google advice. [02:10]

• Establishing a trust is more expensive and complex than a will, so it's important to identify a clear purpose or reason ("prong") before creating one. [02:50]

Common Objectives for Trusts

• Trusts are often used for minor children to manage assets until they reach maturity. [05:40]

• Protecting assets for grandchildren rather than a child’s spouse is a frequent objective, especially to avoid assets passing to an in-law after the child’s death. The assets are "suspended" in trust for the benefit of the child, then eventually pass to grandchildren. Trustees can be familial, such as siblings overseeing each other's trusts. [06:10]

• Trust documents clearly state the purpose and intentions behind their creation to ensure legal clarity. [12:15]

Misconceptions About Avoiding Probate

• Nationally, trusts are promoted to avoid probate, but in North Carolina, probate costs are low, so avoiding probate is rarely a valid reason alone to create a trust because trusts require additional upkeep such as possibly extra tax returns. [13:10]

Special Needs Trusts

• Trusts can protect assets for beneficiaries receiving means-tested benefits, such as Supplemental Security Income (SSI), by preventing those assets from affecting eligibility for government aid. [15:50]

Trusts in Second or Subsequent Marriages

• Trusts help ensure assets ultimately pass to children of a first marriage, even if a surviving spouse from a second or third marriage receives benefits during their lifetime. These trusts prevent assets from passing directly to a surviving spouse, protecting the client's intentions. [17:15]

• Such trusts can "suspend" assets, paying income and principal as needed, but preserving principal for the children of the first marriage as residual beneficiaries. [18:45]

Protection Against Fraud and Undue Influence

• Trusts can safeguard assets from scammers or undue influence, including from fraudulent remote contacts or even family members, by placing assets under control of a trustee rather than the susceptible individual. [21:00]

• In cases where the individual has diminished capacity, a power of attorney may authorize creating a trust consistent with the estate plan to protect their assets. [23:00]

Trusts and Long-Term Care Planning

• Trusts can be structured (using revocable and irrevocable trusts holding property as tenants in common) to protect assets like a home during long-term care, avoiding Medicaid’s five-year look-back rule and asset depletion from nursing home costs. [24:35]

Elective Share Trusts for Surviving Spouses

• To prevent a surviving spouse from taking an elective share amount that would reduce inheritance for children from a prior marriage, an elective share trust can be established. This trust funds the surviving spouse’s share under trustee control during their lifetime and then passes assets to the children afterward. [26:25]